May 20 2015

elb2 I begin today’s newsletter with a heavy heart. I knew these words had to be written sooner or later but that doesn’t make it any easier. I am deeply sorry to note the death of Jean-Francois Theodore. I last enjoyed an aperitif at the Meurice Hotel in Paris with this singularly remarkable man a little over a year ago. A true gentleman, Jean-Francois was in so many ways the first exchange CEO to bring a clear strategic vision to the field of M&A. He made many deals, often in the face of adversity and moved the industry in new ways, from taking stakes in vendors to, of course, being the architect of Euronext in 2000 and eventually creating the first Trans-Atlantic market with NYSE in 2006 (in essence selling at the peak). In 2002, his focussed, strategic approach paid off with the acquisition of LIFFE. I recall only too well being called by Sir Brian Williamson and Jean-Francois within hours of the deal. It was a historic moment and a wake-up call to London that the strategic thinking within exchanges was being led by Euronext and DB1, with LSE an afterthought.

It seems like only yesterday, we enjoyed delightfully stimulating conversation at the Meurice about a myriad of topics ranging from exchanges through Jean-Francois’ more recent business activities and much else beside. Sadly that ongoing dialogue has been prematurely ended…

…The exchange world has been robbed of a great figure. On behalf of the Exchange Invest team, we express our profound sympathy to Jean-Francois’ family.

We may be marking a great loss to the industry but we are all richer for his legacy which will not be forgotten: Jean-Francois Theodore made the industry appreciably better thanks to his strategic genius accompanied by an elegant French panache towards capitalism and global markets. We have lost a friend.

Startupbootcamp FinTech FastTrack Warsaw Thanks

In the end, everything has been overshadowed by the news of Jean-Francois’ death.

However, without disrespect to his memory, a big thank you to everybody who participated in the StartUpBootCamp FinTech FastTrack in Warsaw yesterday organised in conjunction with Mission ToRun (my startup club in Poland). It was a great success with many excellent projects pitched and mentored under the watchful eye of SUBC FinTech London COO Edwina Johnson who is heading to Paris for the FastTrack there as I type…

Today in Exchange Invest Daily:

HKEx aiming for increased stock quota on “through train’ and a separate commodity link soon. Odey ups stake in Plus 500 as some accounts are reopening… Shanghai plans startup market, ICAP completes restructuring, LME developing new warehouse receipt system. Stuttgart complains about Prospectus Directive limitations as Irish SE and others respond to CMU proposals.

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Public Markets

HKEx Chief Hopes Stock Connect Quota To Rise Soon; Aims For China Link In Commodities (subscription)
Enoch Yiu – SCMP
HKEx To Add Commodities To China Connect
Jasmine Ng & Rishaad Salamat – Bloomberg

“HKEx and LME are not going to compete with mainland commodities exchanges and traders but we could work together. Let’s put the gun down and work together,” HKEx CEO Charles Li said at the opening of the annual LME Asia Week in the Hong Kong Convention Centre.

HKEx To Decide In Coming Weeks On Plan To Curb Closing Volatility
Reuters

HKEx expects to make a long-awaited announcement in coming weeks on a controversial proposal to rein in volatility which large investors favour but small investors say discriminates against them.

Under the proposal, unveiled in January, HKEx plans to introduce a so-called closing auction and other volatility curbs that would bring it in line with international peers in New York and Europe.

SSE Planning Startup Market (subscription)
Shen Hong – Wall Street Journal

Shanghai SE (SSE) is on track to inaugurate a new market for small, innovative companies as soon as this year, which will challenge the wildly successful Nasdaq-style startup board in Shenzhen. The Strategic Emerging Industries Board, will list companies in sectors favored by Beijing for building an innovation-driven economy, including computer science, information technology, renewable energy and bioscience.

Read our Premium China series:

HKEx – SSE – Stock Connect Part 1,Part 2,Part 3
HKEx – SZSE Stock Connect Brief
China Capital Markets Transformation – Exchanges & Markets, ETPs & Exchange Infrastructure – Brief Part 1, Part 2, Part 3, Part 4, Part 5
China Capital Markets Transformation – Commodities Trading & Warehousing Brief Part 1, Part 2, Part 3, Part 4
China Capital Markets Transformation – CNY & Banking Reform Brief Part 1, Part 2
China Capital Markets Transformation – Shanghai FTZ Brief Part 1

LME Says Has Developed New Warehouse Receipt system
Reuters

LME said it has developed a new warehouse receipt system with a partner, which it intends to roll out globally.

“This system will make the whole process of warehouse storage, the audit and trailing of warehouse receipts much easier to understand and much more useful,” LME CEO Garry Jones told LME Asia Week.

Plus500 Says UK Accounts May Unlock Wednesday After Temporary Ban Sent Share Price Plunging
Caitlin Morrison – City A.M.

Odey Asset Management has lifted its stake in beleaguered spread-betting firm Plus500 to 14%, as the forex trading website says it will begin to unlock frozen UK accounts as early as today.

The Israel-based tech firm was rocked this week when it announced it was temporarily banning UK customers from trading or withdrawing their money until the firm had taken steps to identify and verify users.

The remaining frozen accounts could take up to two weeks to unlock, depending on how quickly customers can provide the company with their ID details.

PLY: Previous discussions on Plus500 here and here. Plus 500 are apparently coy about providing information about any client account closures on the back of this announcement. It is commercially sensitive by its very definition but investors surely require a boost to confidence that is flagging, well apart from at Odey Asset Management, it seems…

Latest in FT Alphaville Dan McCrum’s Plus500 series

Plus500 churn update
Plus500 requests your patience – Update 2
Plus500: the big freeze

Read our Premium brief: FX – CHF Crisis – Brief

Icap Says Broking Overhaul ‘Complete’ (subscription)
Tim Cave – Financial News

Icap CEO Michael Spencer has drawn a line under a year-long restructuring of the interdealer broker’s voice broking division that involved the cutting of 500 front-office staff and dragged down the firm’s revenues last year.

Check ICAP financial results released yesterday.

PLY: Elsewhere in today’s news, Michael Spencer urges UK EU renegotiation and subsequent referendum not be rushed, as corporate Europhiles want the process accelerated. Meanwhile, it is also good to see Michael championing the acceleration of a new runway being constructed in the London area, after successive governments have dithered to the detriment of London’s status as a European hub.

Back with ICAP, see also our Premium post ICAP Explores A New Galaxy.

CFTC’s Market Risk Advisory Committee Announces Agenda For Upcoming Public Meeting
CFTC

Private Markets

NSE To Introduce New Facility To Prevent Self Trade
Business Standard

To check self-trades, National SE (NSE) said it plans to introduce new facility in the equity, currency derivatives and F&O segments, preventing matching between a buy and a sell order entered in the same order book by a member for the same client code originating.

Tehran SE To Raise Price Fluctuation Level
MondoVisione

Tehran SE (TSE) has ratified the TSE’s proposal to raise daily price fluctuation of the listed equities, debt and derivatives products to ±5%from 23 May 2015. The amount will be ±10% for rights. The fluctuation rate is currently ±4 and ±8% for equities and rights, respectively.

Eying Bitcoin-Like Stock, Overstock Invests In Trading Firm
Wired

Overstock purchased a 25% stake in regulated trading company PRO Securities, an ATS, last autumn. In an SEC filing earlier this year, PRO Securities amended its charter to say it may handle trades in digital securities overseen via “blockchain” technology.

InvestYourWay Offer Bitcoin As Part Of A Fully Diversified Fund – First UK Regulated Investment Manager To Provide Bitcoin Investment As Part Of A Bespoke Portfolio
MondoVisione

Dividend News

CME declared a Q2 2015 dividend of $0.50, payable June 25, 2015, to shareholders of record as of June 10, 2015.

Special Section: FTI, NSEL, India at the Crossroads

PLY: FTIL and MCX flat as an announcement with ongoing ramifications for the Indian corporate code trundles along:

Final Call On NSEL-FTIL Merger Likely In July
Rajat Arora – The Economic Times

The Ministry of Corporate Affairs is reviewing and considering more than 19,000 objections received from FTIL shareholders and related parties against the merger.

Read our Premium NSEL Scandal Brief – Main File and NSEL-FTIL Merger Brief

Products

Euronext & Shenzhen SE – Partnership On ETFs & Indices
MondoVisione

Wall St Eyes Revival Of CDS (subscription)
Joe Rennison – Financial Times
Hurdles Remain In Reviving Single-Name CDS (subscription)
Joe Rennison – Financial Times

The credit derivatives market started life with good intentions, designed as a risk management tool to help banks manage their loan exposure to companies.

Now, after a dramatic decline in the wake of the financial crisis, Wall Street is pushing a second act for single-name CDS.

Corporate Bonds: High Denomination Per Unit Is A Barrier To Entry – Difficulty Of Access To Corporate Bonds For Retail Investors – Boerse Stuttgart Calls For Lowering Of Threshold For Requirement To Produce A Prospectus
MondoVisione

PLY: The perils of the Prospectus Directive and traditional ‘bumps in the carpet risk’ loom large as EU regulation has been surpassed by events. Thus industry leader Boerse Stuttgart is suffering as business can use P2P lending and other platforms as the ridiculous threshold of 100,000 Euros stifles fundraising and is a terrific example of how the EU needs wholesale regulatory reform if it is to genuinely develop a less bank-centric, more dynamic financing marketplace.

Indexes

NYSE Bitcoin Index, NYXBT
ICE
NYSE Gives Bitcoin Some Mainstream Love
Robert Hackett – Fortune

NYSE premiered a bitcoin index on Tuesday, giving an important endorsement to the digital currency that could help give it more mainstream credibility.

Career Paths

Euronext: Demise Of Jean-Francois Theodore, Architect Of The First Pan-European Exchange
MondoVisione

PLY: A sad day for markets. I believe the funeral will take place on Friday in Paris.

Baroness Shields OBE stood down as a NED of the Board of LSEG in order to take up an appointment as Parliamentary Under Secretary for State, Minister for Internet Safety and Security.

FMC approved the appointment of Arun Nanda and S K Mitra as independent directors on the board of MCX.

SEC Chief of Staff Lona Nallengara will be leaving the agency at the end of June.

Financial Calendar

May 20

CME AGM
Hellenic Exchanges-Athens Stock AGM

New announcements

JPX AGM – May 25, 2015
IOSCO & IFIE To Hold Global Investor Education Event 18-20 May In Kuala Lumpur
BGC Partners 2015 AGM – Tuesday, June 2, 2015
FESE Convention – Oslo – June 17-18, 2015: Exchange Invest Founder Patrick L Young will chair the opening panel.
SFOA Burgenstock Meeting Geneva September 22 – 24, 2015. Exchange Invest Founder Patrick L Young will be chairing the blue riband Crossfire panel.

All forthcoming exchange / investment related events are now listed in our Events page.

Analyst Notes

Credit Suisse Reaffirmed Their “Neutral” Rating On ICAP – GBX 550 Price Target
Canaccord Genuity Reissued Their “Buy” Rating On Tullett Prebon – GBX 330 Price Objective

A full table of current analysis can be found on our Analyst Ratings page which is updated daily.

All Analysts, Banks and Brokers are welcome to contribute to this section.

Crowdfunding

Is Zopa’s Tie-Up With Metro Bank The End Of P2P Lending As We Know It?
Management Today

When is P2P lending not P2P lending? Some would argue it’s when one of those peers is, in fact, a bank. Alternative funding providers were once hailed as the potential undoing of banks but are nowadays happy to court the City bigwigs in order to strengthen their reputation.

Today there’s news of a tie-up between Metro Bank and P2P lending pioneers Zopa. Until now the money lent to consumers through Zopa has been provided by individuals looking for a more exciting return than they could get through a savings account, but now Metro Bank will be pushing out an undisclosed amount of cash through the platform.

PLY: A new development but not the end of P2P, that story is only beginning but the pivot as banks try to survive takes another step forward…

Other stories

CFTC Staff Issues an Updated Enabling No-Action Letter for Qualifying Australian Licensed Markets & Issues a Conditional No-Action Letter to Yieldbroker Pty Limited to Provide Additional Time for Compliance with its Requirements
CFTC

European Parliament Agrees Negotiating Mandate For Regulation Of Financial Benchmarks
MondoVisione

FESE: Response To The European Commission’s Consultation Paper On The Green Paper On CMU
MondoVisione
Irish SE Responds To The EC’s Consultation On CMU
MondoVisione

Read our Premium EU CMU Brief

PLY: Public markets must be at the heart of a CMU, if Europe is to prosper whether within an EU or outside it.

FESE: Response To The Review Of The Prospectus Directive
MondoVisione

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